German lawmakers vote to adopt minimum wage

Germany’s parliament voted on Thursday to introduce the country’s first national minimum wage, which will guarantee that most workers in the country will be paid at least 8.50 euros per hour.

The minimum wage is due to take effect on January 1, 2015, but some employers will be allowed two years to phase it in.

The law is a flagship reform of the centre-left Social Democrats (SPD), who made it a condition for entering a “grand coalition” with Chancellor Angela Merkel’s conservatives last year.

The SPD has argued that a formal minimum wage is necessary to stem a yawning social divide in employment that was spawned in part by the labour reforms of Merkel’s predecessor, SPD chancellor Gerhard Schroeder.

“Hard-working, cheap and unprotected. That has been the reality for millions of employees in Germany. That’s over now.” SPD Labour Minister Andrea Nahles, who oversaw the drafting of the law, said in a speech in the Bundestag before the vote.

There was overwhelming support for the law in parliament. Of the 601 votes cast, 535 lawmakers voted in favour and only five against, while 61 abstained.

Minimum salaries in Germany

Unlike most European Union countries, Germany has in the past resisted a minimum wage partly because it is seen as political interference in wage bargaining between unions and employers. It has relied instead on collective wage deals by sector and region.

But coverage by such agreements has decreased to 59 percent of the workforce from more than 70 percent in 1998, according to the Hans Boeckler Foundation, a thinktank close to the unions, and the low-pay sector has surged in the wake of Schroeder’s “Agenda 2010” reforms introduced a decade ago.

“The minimum wage was long due,” said Carsten Brzeski, chief economist at ING, citing a growing divide between rich and poor.

The Confederation of German Trade Unions (DGB) had also welcomed the move after a years-long struggle and rejected as "propaganda" claims that it would destroy jobs.

"The minimum wage won't be a job killer," said its chairman Reiner Hoffmann. "This has been confirmed by serious studies and the experience of our European neighbours and the United States."

The starting level, set to be reviewed every two years, is in line with those in other major developed economies: slightly less than France's 9.53 euros, but above Britain's £6.31 (7.91 euros).

Exemptions

The new law will include more exemptions than initially envisaged, concessions which SPD Labour Minister Andrea Nahles said were intended to enable a smooth transition.

Some sectors will be allowed to delay introducing the wage for two years to help them adjust, and certain groups - including short-term interns, under-18s, trainees and the long-term unemployed - can be paid less under certain conditions.

The exemptions have prompted outrage from labour unions, who say they will hurt the weakest people in the labour market.

“With the high number of exceptions, the coalition has brutally amputated the minimum wage,” Frank Bsirske, head of the influential Verdi labour union, said over the weekend.
Grumbling

Merkel herself had long opposed the minimum wage, but she caved in after tough haggling late last year on forming a "grand coalition" with the SDP.

In the months leading up to the vote, Merkel’s conservatives were unenthusiastic about the plan, claiming that the measure will make Germany less competitive and force companies to move to other countries.

Opponents also say it could force small firms, particularly those in the former communist East where wages are lower, to jettison workers.

Moreover, some members of Merkel’s party grumbled that the SPD has been shaping policy in her six-month-old government. The SPD have already pushed through plans to lower the pension age for long-time workers and raise pension entitlements, moves which have also raised eyebrows on the right and in business. *

Still, the vote received strong parliamentary support.

The law still requires approval from the upper house, but this is considered a formality.